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A recipe for surviving Special Assessments and Full Reserves A/K/A an Ode to THIS IS IT! An Op-Ed by Milena D. Macias, Esq. Chair and Director of Legislative Affairs, Cyber Citizens for Justice Published May 14, 2024
Gas prices, food prices, car prices and even wine prices … everything has gone up!
But the real winner for sticker shock syndrome is reserved for members of condominium owners regulated under § 718, Florida Statutes (the “Condominium Act” or “COA”), with a trophy engraved “fully funded reserves and special assessments.”
Florida law failed us -- allowing partial or waiving of funding. As a result, boards promoted to members a “penny pinch” measure -- inducing membership vote approval to waive or partial reserves.
Meanwhile, all these years we have placed our arms around boards who have a duty of good faith and embraced them and our government officials, failing to realize that the “Winner Takes it All” means we are actually the losers.
But we are not losers – not if we stand up and make our voices known and instruct those who want to want to try and back us up into a corner, whether they are boards, managers, legislatures or lawyers. “THIS IS IT”!
The Issues:
A. Full Reserve Funding. Full reserve funding is now required for (i) roofs; (ii) primary structural or load-bearing walls; (iii) floors; (iv) foundations; (v) plumbing; (vi) electrical systems; (viii) waterproofing and exterior painting; (ix) windows; and (x) items having a deferred maintenance expense or replacement cost that exceeds $10,000. In addition, as part of the Structural Integrity Reserve Study, a licensed engineer or architect performing a visual inspection needs to record the failure to maintain or replace such items.
Make no mistake about it –- full reserves should have always been in place.
B. Special Assessments. In addition to full funding of reserves, boards are placing special assessments (authorized by original DOCs if not amended by the Kaufman language) presumably to cover costs on repairs and rehabilitation for building integrity recertification requirements.
Remarkably, some boards think special assessments are for painting the lobby a different color (which is a material alteration and done without member approval) or adding furniture or other items, violating their duty of good faith to their members.
Of course, this is condoned by some attorneys (a/k/a Desparados) whose obsession with money equates an ethical duty to be the king of diamonds in a deck of cards, rather than the king of hearts (the true ethical duty) to ensure justice. Hopefully, one day the “Desperados” will come to their senses.
C. Milestone Inspections. Moreover, some members of COAs have another fly in the ointment. As a result of the Surfside tragedy, in 2022 the Legislature implemented § 553.899, Florida Statutes for mandatory structural inspections for condominium and cooperative buildings (the “Milestone Inspection”).
The law does not require compliance with the Florida Building Code or the fire safety code. Compliance with the law is to be performed in two phases. Phase 1 requires a visual inspection report to be submitted to the building department by a licensed architect or engineer to evidence any substantial structural deterioration or condition which affects the integrity of the building. If deterioration is not found, phase 2 (requiring additional testing and recommendations for assessing and repairing distressed and damaged portions of the building) is not required. Once the association receives the report, they must distribute a copy to each member, post the report on a conspicuous place (and associations requiring a website must post it on their website).
Residential COAs and residential cooperatives regulated under § 719, Florida Statutes (the “Cooperative Act”) buildings having three stories or taller must have structural inspections called “milestone inspections” once they reach 30 years of age (as determined by be the Florida Building Code) and every 10 years after that. If a building is located within three miles of a coastline, the inspection must be done at 25 years of age and every 10 years thereafter.
What awaits us may lead to a financial Category 5 Hurricane in Florida. Yikes! Instead, let’s downgrade it to a thunderstorm,
The word “milestone” reminds me of the fable “Stone Soup” – where travelers arrive at a village carrying nothing than an empty cooking pot and a stone to make a soup. At the onset, villagers scorned and said the pot is empty. However, as time went by, one by one, the villagers added an ingredient – at the end it was the best soup ever. This analogy demonstrates our need to come together – everyone’s input is valuable -- voices need to be heard.
The Facts:
According to CAI, did you know…
· Over 1.5 million condominium units are located in Florida.
What a way to spend your ”Golden Years”…
For those of us whose golden years are still far away, that dastardly four-letter word called “work” still remains.
Some boards like to “hang out” by the poolside or in the association office all day long and tell their members they are “taking care of business”. There are other boards who are invisible, and if you catch them, they tell you they are “taking care of business” and disappear into a rabbit hole, until the time for the next election.
But then it hits you: they have no real careers -- are they self-employed, trust fund babies -- obviously work is out of style. Why do they have brand new luxury cars while you are still driving your ten-year old economy car.
What does “taking care of business” really mean?
MONEY AND SENSE – DO THE MATH
So what does all of this have to do with emptying your pockets? A lot.
May 6, 2021 - $200,000 30 year
fixed rate -2.96% -- $839.00
B. Hypothetical Maintenance Dues
2021 - $500.00 (monthly dues)
C. Three Year Difference ↑ $1,154.00 2021: 839+500 = 1,339.00 2024 1,343.00+850.00+300.00 = 2,493.00
OUCH! To alleviate some of the sting -- does your association know about…
1. My Safe Florida Condominium Pilot Program
On July 1, 2024, the My Safe Florida Condominium Pilot Program goes into effect.
Allocation of $30 million in state funds is available and aimed at assisting eligible condo associations with structural improvements to withstand hurricane damage while also reducing insurance premiums.
“In order to apply for an inspection…or a grant…for association property or condominium property, an association must receive approval by a majority vote of the board of administration or a majority vote of the total voting interests of the association to participate in the pilot program.”
“In order to apply for a grant…which improves one or more units within a condominium, an association must receive both of the following:
The maximum grant is $175K to a COA. The state will match $2 for every $1 spent by the COA and covers half the costs of roof-related projects ($11 per square foot multiplied by the square footage of the replacement roof) and up to $750.00 per replacement window or door with a maximum $1,500 per unit.
Moreover, Florida’s Department of Financial Services may contract with third parties for grants management, inspection services, contractor services, information technology, educational outreach, and auditing services.”
2. Freddie Mac Condo Project Advisor
In the event you want to (or need to) sell or refinance -– could your condo unit be blacklisted by lenders because of critical repairs needed (i.e., elevators, waterproofing, foundation, sea walls, load-bearing structures) or material deficiencies (i.e., damaging leaks, mold, or water intrusions).
Has your board or association management company utilized or applied or examined Freddie Mac Condo Project Advisor in order to meet requirements for lenders to utilize “Project Certified” status and get mortgages approved?
Has your board or association management company worked with realtors listing units in the building to discuss methodology of the process of removing blacklisted status?
What happens if a realtor representing a prospective buyer steers buyers away because of this issue?
And, if you are on a fixed income and cannot afford new monthly maintenance dues and special assessments …
Well … the vultures (oops – some developers) out there are waiting –- playing a three-card monte game.
These developers see this as an opportunity -- wanting to knock down the building (especially if its waterfront) and replace it with a new building for mega-billion dollar returns. The game shuffle goes something like this:
A unit is bought by the developer using a straw buyer -- who then causes miscontent amongst the members and spreads rumors that more increases are to come. The developer continues to buy more units using straw buyers. At some point, there are enough members to vote to terminate the condominium Members who cannot pay the current increased maintenance and special assessments (and nervous about rumors) are now at the mercy of the developers. The developers knock down the building, leaving the member holding the bag with land value only. The psychological damage is incredible. Instead of killing you with bullets, you are being killed softly by being financially destroyed – just another notch on the developers “another one bites the dust” blackboard.
Recently, the Third DCA (“Appellate Court) remanded a condominium termination case back to the trial court. Members of a COA (whose 1974 governing documents mandated a 100% voting interest approval for condominium termination) appealed a trial court decision holding that a developer was correct to use an 80% voting interest approval to terminate the condominium. The Appellate Court held that there was a substantial likelihood of success by the members.
Frankly, there are only two ways to look at this:
3. Miami Dade Condo Special Assessment Program
Of the 67 counties in the State of Florida, the Condo Special Assessment Program is only available in Miami-Dade County. What gives? It’s genius. Let’s get the other counties on board.
The program provides:
What Can We Do?
For those of us who know how to cook, we realize a recipe is often changed and modified. Let’s figure this together with ingredients resulting in members to maintain their homes (and sanity).
Let’s get all counties involved – we are not “dust
in the wind”… … And, let’s not procrastinate – “don’t stop thinking about tomorrow, it will soon be here”.
Remember, “I am one drop – together we are an ocean.” (Ryunosuke Satoro)
We can and will get this done -- Florida sunshine and a new “Daybreak” await! |
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